Curious Capitalist reader YMM alerts me to an interesting Lester Thurow column in the Sunday NYT and wonders what I think. I’m generally very dubious of Professor Thurow, given as how he spent the early 1990s arguing that the U.S. economy was doomed, only to jump on the U.S.-is-best bandwagon later in the decade.
But his point in the Sunday Times is, as I said, interesting. Thurow simply doesn’t buy that China is going to become the world’s most important economy anytime soon. First he’s dubious of the country’s economic statistics, and surely he’s right to be. Second, he points out that the U.S. economy hasn’t exactly been standing still over the past couple of decades, and probably won’t over the next few. Finally, he picks apart the most basic underpinning of the argument for why China’s GDP will inevitably surpass that of the U.S. this century–that it’s got four times as many people:
It is always a mistake to project population growth rates for a century, but let’s do it anyway: With a one-child policy and a sex ratio that favors boys (many men won’t find wives)–China should experience a decline in population in the 21st century. Yet let’s assume for a moment that China’s population remains constant, at 1.3 billion. If immigration to the United States continued at the current rate, America’s population would rise. If the population grew at 1 percent a year, as it has recently, it would more than double by 2100, reducing the enormous population gap between the two countries.
What do I think? It seems clear to me that China will be a major economic power in this century. It seems equally clear to me that its economy won’t grow 10% a year forever, and that there will be recessions and financial market meltdowns and maybe major social and political unrest along the way. So making straight-line projections of the country’s economic future, as those Wall Streeters are prone to do, is dubious business.
Also, while looking for Thurow’s MIT web page (it was impossible to do on Google; there’s just too much other stuff about the guy online), I came across this fascinating NYT article about the mid-1990s tiff between Thurow and Paul Krugman. A sample:
[W]hen Thurow was told last summer that Krugman was returning to MIT, after two years at Stanford University, he requested that Krugman refrain from disparaging his MIT colleagues — a request that Krugman has honored so far. “He is too personal,” Thurow said. “He makes it hard to have a debate.”
Thurow, on the other hand, offers broad declarations that go far beyond the equations, diagrams and mathematical models that are, in Krugman’s view, the essence of respectable economics. Thurow, for example, offers sweeping statements about the effect of the global economy on Americans.
“Those with Third World skills will earn Third World wages,” he declares, and “anything can be made anywhere on the face of the earth and sold everywhere else on the face of the earth.”
For Krugman, who declined to be photographed with Thurow, such statements are more seat-of-the-pants judgments than testable economic logic. They are, he wrote recently, expressions in a war “between the essentially literary sensibility that we expect of a card-carrying intellectual and the scientific-mathematical outlook that is arguably the true glory of our civilization.” …